Introduction

The UK electricity market stands at a crossroads. As of April 2025, the government is considering a fundamental shift in how electricity is priced across Great Britain through the introduction of zonal pricing. This reform would replace the current national pricing model with a system where electricity prices vary by geographical zone, potentially transforming economic incentives for generators, consumers, and investors throughout England, Wales, and Scotland. This report examines the proposed zonal electricity pricing reform, analyzing its potential economic impacts, implementation challenges, and stakeholder positions. Drawing from recent research, government publications, and industry perspectives, it provides utility executives with a comprehensive understanding of how this significant market redesign could affect their operations, investment strategies, and financial outlook. The proposed reform comes at a critical juncture in Britain's energy transition. With ambitious targets for a clean electricity system by 2030, the government must balance multiple competing priorities: ensuring affordable energy for consumers, maintaining security of supply, attracting investment in renewable generation, and managing an increasingly complex grid. Zonal pricing represents one potential solution to these challenges, but as this report will demonstrate, it also introduces new risks and uncertainties that must be carefully evaluated